The overhaul of the Pay As You Earn system (PAYE) has cost HMRC more than £950m, the National Audit Office (NAO) has revealed.
HMRC said that it had to forgo collections from a seven-year period because of the decision to raise the tax threshold over a three-year period and because of a backlog of cases that have proved too many to work through.
HMRC said the £950m it has missed out on is not connected with April’s introduction of its Real Time Information (RTI) system. The NAO said HMRC has done a good job with RTI, where companies need to report details of payments to employees when they are made rather than annually. However, parts of the system are still being tested so some work has been delayed.
The audit office also said that that HMRC hasn’t taken into account the extra development costs, and should make amends urgently.
David Heaton of tax advisers Baker Tilly said of the RTI system: “Given the number of incorrect tax codes that have been issued over the last three months it must be doubted whether the interface is working as hoped.”
“More worryingly HMRC’s system has been applying ‘guestimated’ liabilities to some employer records, allegedly because no filing has been made.”
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